4.1. This chapter is concerned with the definition and description of institutional units and the way in which they are grouped to make up the sectors and sub-sectors of the System. Economic entities that are capable of owning assets, incurring liabilities and engaging in economic activities and in transactions with other entities are described in the System as institutional units. The various sectors and sub-sectors of an economy are composed of institutional units that are resident in the economy, the total economy consisting of the entire set of resident institutional units. The definition of residence is explained later.